Balance of payments – commentary

2024 Q3

Simultaneously with the publication of the 2024 Q3 balance of payments figures, revised data for 2024 Q2 are being published. The revised data mainly take into account updated CZSO data on exports and imports of goods and services and, on the financial account, data from statements submitted to the CNB by financial and non-financial entities.

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The current account ended 2024 Q3 in a deficit of CZK 9.4 billion. The financial account recorded an inflow of funds (net borrowing) of CZK 27.5 billion owing to higher growth in external liabilities than external assets. The CNB’s reserve assets fell by CZK 13.6 billion (adjusted for valuation differences). The current account surplus was 1.2% of GDP on an annual basis, and the goods and services surplus was 6.6% of GDP.

Ratio of Current Account and Goods and Services Balance to GDP
(CZK billions, right-hand scale in %)

Note: Indicators calculated on the basis of annual moving aggregates

The goods and services balance recorded a surplus of CZK 102.9 billion in Q3. The balance improved by CZK 39.1 billion year on year at current prices due to stronger growth in goods exports (index 111.5) than imports (index 108.7). The goods balance ended in a surplus of CZK 73.5 billion, up by CZK 36.9 billion on a year earlier. The services balance also showed a surplus of CZK 29.3 billion, representing a year-on-year increase of CZK 2.2 billion. This was due mainly to higher exports of transport services and other trade-related technical services, and lower imports of insurance services. Foreign travel recorded a surplus amid a year-on-year increase in exported and imported tourism services. The total goods and services turnover at current prices was 10.1% higher year on year in Q3, with exports rising by CZK 140 billion and imports by CZK 100.9 billion.

The primary income deficit was CZK 97.9 billion in Q3. Its year-on-year increase of CZK 43.6 billion was due mainly to higher dividends paid abroad on direct and portfolio investment and growth in the share of non-residents in reinvested earnings in domestic firms. Dividends paid abroad amounted to CZK 105.6 billion, representing a year-on-year increase of CZK 34.7 billion.

Secondary income ended Q3 in a deficit of CZK 14.4 billion (a year-on-year deterioration of CZK 3.9 billion). The widening of the deficit was due to a worse balance of labour costs in connection with the employment of non-residents in the Czech Republic and Czech residents abroad (payments of taxes, social security contributions and social benefits) and to a rise in the deficit on net income from the EU budget recorded in the secondary income balance. 

The capital account

The capital account ended Q3 in a surplus of CZK 17.7 billion. The year-on-year increase in the surplus of CZK 13.6 billion was due to extraordinary payouts of flood-related insurance claims and higher income from the EU budget recorded in the capital account.

The financial account

The financial account (including the change in the CNB’s reserve assets) recorded a net inflow (net borrowing) of CZK 27.5 billion in Q3 owing to external liabilities increasing more markedly than external assets.

Ratio of Financial Account to GDP
(CZK billions, right-hand scale in %)

Note: Indicators calculated on the basis of annual moving aggregates

Foreign direct investment saw a net inflow of funds totalling CZK 20.3 billion. The main factors on the liability side were an increase in the share of earnings reinvested by foreign owners in domestic subsidiaries and drawdown of loans from foreign affiliated companies. Asset transactions included an increase in the share of domestic owners in reinvested earnings, a rise in equity capital in foreign firms and an increase in loans provided to foreign firms. 

Portfolio investment recorded a net inflow of CZK 84.9 billion. This was due mainly to purchases of domestic government and bank bonds and, to a lesser extent, shares by foreign investors, which represented an increase in liabilities of CZK 120.2 billion. Assets simultaneously increased by CZK 35.3 billion due to an increase in foreign ownership interests and bonds held by domestic non-bank investors.

Derivatives trading recorded an outflow of CZK 2.3 billion.

Other investment saw an outflow (net lending) of CZK 89 billion.

This outcome was significantly affected by a rise in the stock of short-term assets of other sectors (non-financial corporations, financial institutions other than banks, and households) abroad. The net outflow of funds abroad was CZK 60.5 billion.

The foreign exchange position of the banking sector (including the CNB) recorded repayment of part of short-term deposits accepted abroad. The net outflow of funds was CZK 20.4 billion.

The external position of general government recorded a net outflow of CZK 8.1 billion due to trade credits provided abroad. Long-term financial loans from abroad were repaid at the same time.

The CNB’s own transactions and transactions for CNB clients resulted in a decrease in reserve assets of CZK 13.6 billion (adjusted for valuation differences).